Tuesday, September 28, 2021

U.S. Sanctions Hit Iran’s Plan to Tap Giant Gas Trove

U.S. Sanctions Hit Iran’s Plan to Tap Giant Gas Trove

Tap Giant Gas Trove

Iran is finding it hard to receive payments for its natural-gas exports to Iraq, as U.S. pressure hits one of the Islamic Republic’s most crucial sources of revenue beyond crude.

U.S. Sanctions Hit Iran’s Plan to Tap Giant Gas Trove
U.S. Sanctions Hit Iran’s Plan to Tap Giant Gas Trove

Iran’s latest difficulties highlight the ways in which U.S. sanctions, set to take effect in November, are already affecting the country’s key industries and its international customers. The Trump administration’s decision to ban Iran’s oil exports has led to a 29% drop in crude shipments in three months and contributed to a rise in oil prices above $80 a barrel.

Iranian natural gas sales are also prohibited under the sanctions, which could scuttle Tehran’s ambition to boost exports of the commodity. Iran holds the second-largest natural-gas reserves in the world. In 2016, after previous sanctions had been lifted, Iran said it hoped to start selling natural gas to the European Union this year.

In recent weeks, Iraq has been struggling to continue its natural-gas purchases from Tehran because banks are reluctant to carry the payments ahead of returning U.S. restrictions, according to people close to both sides of the transactions. Iraq was Iran’s most promising gas market because the huge needs of its power plants are fueled by the commodity.

“The difficulty in getting gas from Iran now is linked to the issue of transferring money to Iran because of the American sanctions,” Sadoun Shehan, deputy head of media at Iraq’s electricity ministry, told The Wall Street Journal. Tehran has been forced to curb supplies as U.S. pressure has “prevented any money transfer from Iraqi banks especially in U.S. dollars, to Iran,” the Iraqi official said.

Iran started exporting gas to Iraq last year. The deliveries had been delayed for four years as Islamic State expanded its territory in Iraq. The militant group had impeded the completion of a pipeline connecting both countries, but was defeated decisively last year.

Iran’s oil ministry said it had no information on the gas payment issues and Iraq’s oil ministry didn’t return a request for comment.

Baghdad, which badly needs the commodity for its power stations, is now considering bringing floating liquefaction plants to source the gas elsewhere, according to the people familiar with the matter.

Iran also exports limited quantities of natural gas to Azerbaijan and Armenia, as well as Turkey, with which it has had repeated payment disputes.

Source: The Wall Street Journal

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